Chart 1: DI Trust Fund Ratio (1970-2035)
Chart 2: DI Income and Cost Rate (1990-2090)
Chart 1: DI Trust Fund Ratio projections before and after passage of the Bipartisan Budget Act of 2015 (1970-2035)
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Background: The Social Security Disability Insurance program (DI) is financed from three sources. 1) Of the 12.4 percentage point Social Security payroll tax (the total amount paid by workers and their employers), 1.8 percent is earmarked for the Disability Insurance trust fund. The remaining 10.6 percent is earmarked for the Old Age and Survivors Insurance (OASI) trust fund. 2) Some income taxes levied on recipients of Social Security benefits are earmarked to pay for Disability Insurance. 3) If tax revenues are not sufficient to cover expenditures, DI benefits can be paid from the DI trust fund reserves, interest earning U.S. Treasury bonds which have accumulated from past surpluses of revenue over expenditures.
Since 2005, DI benefit payments have exceeded revenues from the first two sources and a part of DI benefits have been paid by drawing down trust fund reserves. On the eve of the Great Recession in 2008, The Social Security Trustees projected that the DI trust fund reserves would not be depleted until 2025. The recession resulted in significantly lower levels of payroll tax revenues than were expected and a slight increase in the number of beneficiaries. Since 2012, the Trustees have been projecting depletion of DI trust fund reserves by 2016, at which point the program’s tax revenues would only cover 81 percent of scheduled benefits.
The 2015 Bipartisan Budget Act of 2025, enacted on November 2, 2015, made several changes to the Social Security Act that had the effect of extending the projected date at which DI trust fund reserves are depleted to 2022. The legislation temporarily increased the share of Social Security payroll taxes dedicated to the DI trust fund to 2.37 percent from 1.8 percent for the years 2016, 2017 and 2018. (During those three years, the percentage allocated to the OASI trust fund would fall to 10.03 percent leaving the total combined tax rate of 12.4 percent unchanged.) In 2020, the allocation of payroll taxes between the two trust funds would return to the current levels. The legislation also made slight changes to the way disability insurance claims are adjudicated by State agencies (eliminating the "single-decision maker" process) and increased funding for continuing disability reviews and other program integrity activities. The overall effect of those provision is to reduce slightly the expected number of DI beneficiaries, and therefore expected future program costs, below what was expected prior to the passage of the Act.
The Social Security Disability Insurance (DI) program pays benefits to qualifying workers who are deemed unable to engage in ‘substantial gainful activity’ because they have a medical condition that is expected to last at least one year or to result in death. As of the end of November 2015, the DI program provided benefits to 10.8 million Americans, 8.9 million disabled workers and 1.9 million of their dependents.
Chart 2: Annual DI Income and Cost Rates before and after the passage of the Bipartisan Budget Act of 2015 (1990-2090)
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The Trustees of the Social Security program make projections of the system's finances over the next 75 years. The lines in Chart 2 show the historical values and current projections for the cost and income (excluding interest) of the Disability Insurance program as percentage of taxable payroll, known as the cost rate and the income rate. The bars at the bottom of the chart show the annual balance between revenues and expenditures, One set of lines and bars represents the projection in the 2015 Trustees Report, the other shows the revised projections after the passage of the Bipartisan Budget Act of 2015.
As the chart indicates, between 1994 and 2004 the DI program had a positive annual balance with income exceeding expenditures. The excess revenue accumulated in the DI trust fund in the form of special issue US treasury bonds. Since 2005, the program has run negative annual balances with expenditures exceeding tax revenue and the assets of the trust fund being expended to make up the difference (see chart 1 above). Over the long-range, projected costs are expected to exceed income for the foreseeable future. Once the Di trust fund reserves are depleted, the program would only have enough revenue to pay about 81% of scheduled benefits.
Chart 2 shows that the effect of the Bipartisan Budget Act of 2015 is significant in the short term, but very modest over the long-range. In 2016, 2017 and 2018 revenues will exceed costs before falling back to the rate of 1.8% of taxable payroll that prevailed before passage of the Act. The additional revenue will be enough to push back the date when trust fund reserves are depleted by 6 years. Over the long term however, program costs are still expected to exceed revenues for the foreseeable future with negative annual balances only slightly smaller than before the passage of the Act. If the DI trust fund is depleted in 2022, tax revenues will not be sufficient to pay scheduled benefits after that date.
Chart 1: U.S. Social Security Administration, Office of the Chief Actuary, OASDI Trustees Report, 2015, Table IV.B4 (Single year tables and intermediate assumptions) https://www.ssa.gov/oact/tr/2015/LD_figIVB3.html. Estimate of the Effects on the OASDI and DI Trust Funds of enacting the temporary reallocation of a portion of the OASDI payroll tax rate proposed in H.R. 1314, the Bipartisan Budget Act of 2015. Memo from Chief Actuary to Speaker Boehner, October 27, 2015. https://www.ssa.gov/oact/solvency/JBoehner_20151027.pdf
Chart 2: U.S. Social Security Administration, Office of the Chief Actuary, OASDI Trustees Report, 2015, Table IV.B1 (intermediate assumptions) https://www.ssa.gov/oact/tr/2015/LD_figIVB1.html